Alltopstartups
  • Start
  • Grow
  • Market
  • Lead
  • Money
  • Guides
  • Startups Directory
Pages
  • About
  • Advertise
  • Contact Us
  • Homepage
  • Resources
  • Submit Your Startup
  • Submit Your Startup Story
AllTopStartups
  • Start
  • Grow
  • Market
  • Lead
  • Money
  • Guides
  • Startups Directory
0

How to Choose the Best Small Business Loan?

  • Thomas Oppong
  • Aug 11, 2021
  • 2 minute read

Setting up or expanding a business is an exciting process but can also be an anxiety-ridden one. Therefore, making informed and well-calculated decisions is paramount to success. Besides ideas, capital is crucial in running a business, and most times self-funding is not enough, hence the business loan option.

Irrespective of the business stage, entrepreneurs find themselves in tight and urgent spots that necessitate quick money. Usually, the safest source for such emergencies is a business loan. Small business owners might have endless micro-finance options and other institutions but the first process should be to compare small business loans with Lantern by SoFi 

According to Lantern Credit, 43% of small business owners seek businesses in different stages. This shows the high likelihood of an entrepreneur to approach a lender.

Here are different types of business loans that small business owners should consider based on their needs and objectives.

1. Small Business Administration Loans

Under this category, there are different loans to business owners that meet specific requirements and qualifications

7(a) Loan Program

This is the most common loan for small business owners because of its basic nature. Entrepreneurs can use it as working capital, refinance debt, purchase assets, or acquire and expand the business.

Pros

  • Long repayment period
  • Relatively low interest rates
  • No collateral required

Cons

  • Rigorous qualification process
  • Individual security

Microloan program

Just like the 7(a) loan, SBA offers loans for similar uses. The main difference with this type is the shorter repayment period and smaller loan amount.

Pros

  • Quick loan processing
  • Lends small business that may not qualify traditional lending procedures

Cons

  • Government and bank as layers of bureaucracy
  • Restrictions (can’t finance debt or buy real estate)

CDC/504 Loan Program

Small business owners have a long-term fixed rate, especially for equipment and real estate. Approved lenders cover up to 50% while SBA provides 40% of the loan. It is the responsibility of the borrower to cover the remaining percentage.

Usually, borrowers have a chance to negotiate from 10 to 20-year maturity.

Pros

  • Huge loan amounts
  • Easy qualification
  • Flexible payment terms

Cons

  • Spending restrictions
  • Browser must be capable to cover 10% of the loan
  • Must create jobs

2. Traditional Loans

Unlike SBA loans with strict requirements and qualification processes, traditional loans are more flexible. Small business owners have more opportunities in this category of loans.

Equipment loan financing

Equipment for business covers everything from tablets to big machinery in a warehouse. Small business owners can pay monthly installments for the item as they attend to other needs of the business.

Pros

  • Quick processing time
  • Flexible terms
  • No extra collateral

Cons

  • Only buys equipment
  • Relatively high interest rates
  • No equipment leasing, only purchase

Line of Credit

Entrepreneurs operating in unpredictable business environments use this for any amount they need whenever they need.

Pros

  • Only pay for what was taken
  • Balances cash flow in off-peak seasons
  • Encourages business flexibility

Cons

  • Difficult qualification process
  • Extra processing fees

It is important to take time and make use of Lantern Credit’s knowledge in evaluating all the loan options. Remember, prioritizing business objectives and needs is the secret to growth and success.

Thomas Oppong

Founder at Alltopstartups and author of Working in The Gig Economy. His work has been featured at Forbes, Business Insider, Entrepreneur, and Inc. Magazine.

Latest on AllTopStartups
View Post

The 3 Ways Your Store’s Sign Can Enhance The Customer Experience

View Post

Innovative Gifting Ideas For Your Startup’s Best Talent

View Post

Understanding Negative Gearing: A Deep Dive into Property Investment

AllTopStartups
Published by Content Intelligence Media LLC

Input your search keywords and press Enter.